Rewind: How Finance, Niti Aayog had flagged objections before Adanis bid, six airport wins

From running a private air-strip at Mundra, the Adani Group’s transformation into the country’s largest private developer in terms of number of airports handled and the second largest, in terms of passenger traffic, happened over less than 24 months.

The Group’s entry into the airports sector came about even as the Union Finance Ministry and the Niti Aayog put on record objections regarding the 2019 airport bidding process that were subsequently overruled, clearing the way for a clean sweep of six airports on offer by the Adani Group.

Before bids were invited for the privatisation of the airports at Ahmedabad, Lucknow, Mangalore, Jaipur, Guwahati and Thiruvananthapuram, the Centre’s Public Private Partnership Appraisal Committee (PPPAC) had discussed the Civil Aviation Ministry’s proposal for the process on December 11, 2018.

During these discussions, a note from the Department of Economic Affairs, according to the minutes of the meeting, said: “These six airports projects are highly capital-intensive projects, hence it is suggested to incorporate the clause that not more than two airports will be awarded to the same bidder duly factoring the high financial risk and performance issues. Awarding them to different companies would also facilitate yardstick competition.” The DEA’s note, dated December 10, 2018, to the PPPAC was submitted by a director in the department’s PPP cell.

To buttress its argument, the DEA cited the precedent of the Delhi and Mumbai airports, where GMR, despite being the only qualified bidder originally, was not given both the airports. It also referred to the privatisation of Delhi’s power distribution, where the city was carved out into three zones and given to two separate companies. At the PPPAC meeting, according to the minutes, there was no discussion on this red flag raised by the DEA.

On the same day as the DEA note, NITI Aayog raised a separate concern regarding the airport bidding. Said a memo prepared by the PPP vertical of the government’s key policy think-tank: “A bidder lacking sufficient technical capacity can well jeopardise the project and compromise the quality of services that the government is committed to provide”.

In response to this, the PPPAC, chaired by the then DEA Secretary, noted that the EGoS (empowered group of secretaries) had already decided that “Prior airport experience may neither be made a prerequisite for bidding, nor a post-bid requirement. This will enlarge the competition for brownfield airports, which are already functional”.

During the bidding process for the six AAI-run airports, the Adani Group outbid its rivals, including experienced players such as GMR Group, Zurich Airport and Cochin International Airport Ltd in addition to other infrastructure players, by a big margin in each of the six bids, thereby winning the rights to operate all six airports for a period of 50 years. This was a departure from the privatisation of Delhi and Mumbai airports, where the concession period was 30 years, in addition to the AAI holding 26% equity in both these airports.

A year after it won the bids for the six airports, the Adani Group signed concession agreements for Ahmedabad, Mangaluru and Lucknow airports in February 2020.

Then in March 2020, the Group invoked a Covid19-linked force majeure to seek a delay until February 2021 in taking over the three airports from AAI, citing difficulties in the transitioning processes, particularly with regard to the airport staff.

The AAI had asked the Group to take over the three airports by November 2020. Three of these six airports — Ahmedabad, Mangaluru and Lucknow — were consequently handed over to the Adani Group in November 2020. The concession agreement for the other three airports — Jaipur, Guwahati and Thiruvananthapuram — were signed between AAI and Adani Group in September 2020.

Just under six months after it sought more time from AAI citing the Covid-19 pandemic, the Adani Group went on to acquire a controlling interest in the country’s second largest airport in Mumbai and the upcoming Greenfield airport in Navi Mumbai from the GVK Group.

In the months before the Adani Group’s takeover of the Mumbai airport, the GVK Group had signed an agreement with investors, including India’s sovereign fund (the NIIF), in October 2019, trying to fend off the Adanis. But in less than a year, on August 31, 2020, the GVK Group signed an agreement to let Adani Enterprises acquire its stake in Mumbai airport and Navi Mumbai airport.

Incidentally, a month before it decided to throw in the towel, the GVK Group had to face the heat from multiple investigative agencies, with the Enforcement Directorate (ED) conducting searches at the offices of GVK Group and the residences of its promoters in Mumbai and Hyderabad, in connection with a money laundering case for alleged irregularities in the development of Mumbai international airport.

On July 7, 2020, the ED had registered a complaint under Section 3 of the Prevention of Money Laundering Act (PMLA) against the GVK Group and its chairman GVK Reddy, his son GV Sanjay Reddy and a few others, based on an FIR filed by CBI against them on June 27. The CBI had also alleged irregularities in the development of Mumbai international airport.